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5.
The theoretical ideal is to perform the operational design in
a manner that minimizes coordination cost
Within the
same unit A B
Across
different A B
units
“Under norms of rationality, organizations group positions to minimize
coordination costs”
“Organizations seek to place reciprocally interdependent positions tangent to
one another, in a common group, which is (a) local and (b) conditionally
autonomous”
(Thompson ,1967, p. 57)

7.
Today, we skip the first stage by using colors to indicate who
is interdependent and thus should be grouped together
1.
Identifying A B C E F
interdependencies
D
”Unit A” ”Unit B”
2.
Grouping of
roles/units A B C E F
based on the
D
interdependencies

8.
The simulation task is analogous to a company that decides to
move from one grouping criterion to another (a)
= Geography A
1 Initial: Geographical organization
= Geography B
Unit A Unit B
2 The firm identifies roles according to new criterion
= Product 1
= Product 2

9.
The simulation task is analogous to a company that decides to
move from one grouping criterion to another (b)
3 The firm restructures according to new grouping criterion
= Product 1
= Product 2
Unit A Unit B

14.
What’s the analogy?
• Colors
– People that you are dependent upon (e.g., that work on the same process
as you do)
• Tables
– The formally defined units (e.g., departments)
• Coordination cost
– The cost associated with collaborating, communicating, exchanging
information etc within and across units
• Switching costs
– The costs that arise as a result of transferring people to another unit (e.g.,
training in new role, temporarily reduced productivity, etc.)

15.
There is a small set of simple rules that we need to follow
The goal : To minimize table and total group coordination cost by grouping same
color around table
1. You should agree around the table about which person to move
2. All moves are reciprocal (i.e., between two tables) – you must
receive a person from the table you are moving a person to
3. Each table can make 5 moves (within the timeframe of the
simulation)
4. Each move must be documented on the attached sheet, which
should be handed to the facilitator when a move is executed
– The two tables involved in swap hand in one paper sheet

20.
What’s analogous to what we experience in real life?
1. Organizations sometimes change the ”grouping criterion”
– E.g., they move from a functional to process based structure, or from geographical to
product based structure)
2. One must try to increase both individual, team and overall performance
3. Reconfiguring an organization in such situations depends on the capacity to handle
a complex set of direct and indirect interdependencies
– That capacity is limited and the decision process may ”satisfice” rather than ”optimize”
3. At some point, ”switching” (i.e., reconfiguration) costs will exceed the benefits
(reduction in coordination costs)

21.
What simplifying assumptions were made?
1. In real life there are more options. One can:
– Move people
– Move tasks
– Merge two or more sub-units
– Establish integrator roles
– Remove the interdependency that creates need for coordination
2. More time is available too
3. People who are interdependent cannot be identified by means of the color of their
clothing!

22.
In sum: What’s new?
• The simulation creates an experiential setting for learning about key organization
design principles
• It shows how alternative designs may be quantified
• It allows a comparison between ”optimal” and ”actual” decisions in a design
process
 Continuing this line of work may contribute to making organization design a more
analytical discipline

23.
Thanks
• To you – for participating
• To Thorvald Hærem – for allowing us to use you as test pigeons
• To Tido Eger for developing the Excel tool
• To the following companies, for providing t-shirts:
– Accenture
– Petroleum Geo-Services (PGS)
– Posten
– Expert
– Ringnes (Solo)
– Kiwi